United Parcel Service, $UPS, rose out of a consolidation channel in June and moved higher to an interim peak at the end of October. It retraced about half of that move before ripping to a higher high at the beginning of December. That could not hold either though and it fell back to a higher low. A much stronger move higher then took it to a new all-time high in January. It has struggled ever since. A dramatic drop put the stock price back to the bottom of that initial consolidation channel, evaporating a year of gains.
It started to move higher again in March and broke through short term resistance at the end of last week. The RSI is over the mid line and rising toward the bullish zone with the MACD crossed up and about to turn positive. The Bollinger Bands® are also shifting higher. There is resistance at 113 and 116.75 followed by 120.50 and 124 with a gap to fill to 126.50. Support comes at 110.35 and 109 then 104.30. Short interest is low at 1.6% and the company is expected to report earnings next on April 26th.
The April options chain is just opening up single dollar strikes but shows high open interest at the 110, 115 and 120 Call strikes. April 27 Expiry options have been lightly traded so there is no bulky open interest but they do show traders expecting a move of $6.60 between now and the expiry the day after the report, or about 6%. May options have also been lightly traded but June options show open interest favoring the upside with it ranging from 105 to 125 on the call side then big again at 140, with puts focused at 105 and 110.
Trade Idea 1: Buy the stock now (over 110.35) with a stop at 109.
Trade Idea 2: Buy the stock now and add an April 27 Expiry 109/105 Put Spread ($1.40) selling a June 120 Call ($1.35) to fund the protection.
Trade Idea 3: Buy the April 27 Expiry 105/112/117 Call Spread Risk Reversal ($1.00).
Trade Idea 4: Buy the April 6 Expiry/May 115 Call Calendar ($1.90).
Elsewhere look for Gold to consolidate with a downward bias while Crude Oil consolidates in a tight range. The US Dollar Index is also consolidating in a downtrend, trying hard to reverse it, while US Treasuries are showing signs of a potential reversal to the upside. The Shanghai Composite and Emerging Markets continue to consolidate, the former around long term support and resistance, and the latter at the highs.
Volatility looks to continue to drift lower easing the pressure on the equity markets. Their charts all show retrenchment in the short term, with the IWM trying to reverse and lead them all higher. On the longer picture the IWM and QQQ look strong with the SPY stuck in broad consolidation. Use this information as you prepare for the coming week and trad’em well.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.